What to Consider Before Entering a Restaurant Lease?

If you are a restaurant owner or are opening a restaurant shortly, you will need a commercial property. The property you select for your business is hugely significant, as details such as location and layout choice of your restaurant space will likely affect how your business progresses. When you choose a business space, you will probably lease it and, therefore, have to sign a commercial lease agreement. Commercial property leases set out key restrictions and permissions for the use of the property and detail your rights and responsibilities, such as your monthly rent. Therefore, you must consider the lease agreement carefully before choosing your business premises to get the best deal. This article will describe some points you should consider before you enter a restaurant lease agreement in the UK.

A Commercial Lease  

A commercial lease agreement is a legal contract between you as the tenant and your landlord. It governs the retail space you occupy. When you choose a commercial lease, you will have the sole occupation of the business premises.

As a commercial tenant, you will need to consider many things when entering a lease agreement, such as 

• rental amount;
• use of space;
• services and additional costs; and 
• responsibility for repairs.

However, as a restaurant owner, there are specific things you may need to consider when entering a restaurant lease. We point out some of these below.

Use of Space

A commercial lease agreement specifies what you can and cannot do with commercial premises. Therefore, before entering a restaurant lease, the first thing to consider is whether it permits you to run a restaurant. You should also check what the lease says about: 

• time of use, and remember that your restaurant is active before and after opening hours; and 
• any noise level restrictions.

Payments

The main payment associated with a commercial lease agreement is the rental payment. This will be one of your main outgoings, so before entering a restaurant lease, you must check the rent and compare it to other potential business premises where you can base your restaurant. The typical charge for rent will be per square metre (psm), which includes the stairs. Therefore, you should carefully consider the use of space and how you lay your restaurant out to get the best rental deal. 

In addition to your regular rent payments, commercial lease agreements detail other costs you are liable for. Before entering a restaurant agreement, you should consider these to understand your outgoings. This will allow you to understand the actual cost of the commercial lease agreement and compare rental spaces when you view other potential buildings to run your restaurant. 

Typical payments you could make are:

• those concerning shared areas such as for utilities and general maintenance;
• parking lots;
• security; and 
• insurance.

Many of these fall under an umbrella category called ‘service charges’.

Renovations and Improvements

When you enter a restaurant lease, you must be sure of any restrictions concerning renovations or improvements you wish to make. As your business is a restaurant, you may require a precise fit-out to match your branding and style. This could mean extensive changes to what already exists in the property space.

You may need to leave the premises as you found them when you vacate. Also, you must understand if anything you purchase remains yours or becomes your landlord’s when you leave the property. This is particularly important for you as a restaurant owner as you likely need to buy substantial equipment to run the business.

Signage

Commercial lease agreements often detail rules about the display of external signage for your business. Before entering a restaurant lease agreement, you must consider these because restaurants rely on signage to create business and promote your brand. You will likely need written consent from your landlord before you display any signage, which they should provide you with as long as it complies with the following:

• municipal codes;
• ordinances; and
• other rules in your lease agreement.

Renewal Options 

When you enter a restaurant lease, you must be clear on your renewal options when the lease ends. Whilst it may seem a long way off, if you establish your restaurant as an icon of a specific area of London, for example, you will likely want to be able to renew your lease to ensure your restaurant remains in its current location. 

Key Takeaways

There are essential points to consider before you enter a restaurant lease. You must consider these to ensure that you get the best space for your business in terms of expense and suitability. For example, you should consider what payments you may be liable for in addition to your rental payments to check the exact cost compared to other commercial spaces. You should consider rules about signage and renovation. Signage is vital for restaurants to direct customers to your business, and you will want to ensure your restaurant layout is as per your preferences. 

If you need help understanding what to consider before entering a restaurant lease in the UK, our experienced leasing lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. So call us today on 0808 196 8584 or visit our membership page.

Frequently Asked Questions